EV Production Cutbacks
Volkswagen's decision to cut back on EV production comes as the demand for electric cars is about 30% less than the company's projected production figures. This decline in demand is a result of reduced or stopped subsidies in multiple countries, including Germany, Sweden, and France.
The production of the ID4 electric SUV and the new ID7 electric sedan will be reduced over the next two weeks. Additionally, the plant's summer vacation will be extended by a week for employees working on electric vehicles. This will subsequently result in laying off approximately 300 out of the 1,500 temporary workers employed at the factory.
Despite the reduction, the production of the Passat combustion engine models will continue without any changes.
"We are experiencing strong customer reluctance in the electric vehicle sector." - Manfred Wulff, the Head of the Factory's Works Council
Impact on the Stock Market
Following this announcement, Volkswagen's shares fell by 2%. However, the shares have shown signs of recovery, gaining 1% and trading at 122 euros ($133.30) from the previous closing price.
Future Predictions
Despite the current scenario, Volkswagen remains optimistic. A spokesperson for the company expressed confidence that the plant's capacity utilisation would increase again with the launch of the ID7 at the end of the year.
However, some analysts have expressed concerns, stating that the cut in production implies that the European EV market isn't growing at a pace fast enough to support all the new EV models and the planned additional capacity. Daniel Schwarz, a Stifel analyst, noted that the reduction of temporary staff and cancellation of a shift indicates that Volkswagen isn't expecting the situation to improve in the short term.
Competing in the EV Market
Volkswagen's EVs are competing against German and Chinese-made vehicles from Tesla and a range of emerging Chinese automakers. The company has also invested €1 billion into EV production at the Emden factory, showing its commitment to the electrification of its vehicle line-up.
The Situation in the UK
Volkswagen, the most popular car maker in the UK, has also slashed the production of electric cars in the region due to a drop in demand. The company noted that the demand for EVs is 30% lower than expected, leading to a reduction in staff and shifts.
Research by Teads, an advertising technology company, indicates that about one in ten drivers planning to buy a new car in the next six months will opt for a petrol or diesel vehicle due to the rise in charging costs. The research also highlights the lack of charging infrastructure, with 85 EVs for every public charger in the UK, increasing drivers' anxiety about reaching their destination on a single charge.
Conclusion
With the recent developments in the EV industry and the challenges faced by Volkswagen, it's clear that the journey to electrification is not without its hurdles. However, with persistent efforts and strategic planning, car manufacturers can navigate these challenges and continue to push for a greener future.
Please note that the current situation is dynamic and may change as more information becomes available.
Part Exchange with OurCar
We've partnered with OurCar to give our customers an option to sell their old vehicle or, get out of their current financial agreement. OurCar will settle any outstanding finance and will help you to avoid the hassle that comes with selling your car privately.
Leasing Guides
In simple terms, leasing is the single most cost-effective and hassle free method of driving a brand-new car. The process of leasing a car is quite simple but, as ever, you should know exactly what’s what before signing on the dotted line.
Frequently Asked Questions
Here you can find answers to the most frequently asked questions about the car leasing process. If your question isn't answered here, feel free to contact us.